Abstract
The purpose of this study was twofold: to examine the determinants affecting borrowing by urban households in north-eastern Greece, and to examine the amount of money borrowed by those households. The study used cross-sectional data from 2009. The empirical analysis employed was based on the estimation of a two-stage Heckman model and the quantile regression model. Results indicated that young married and employees get more loans than others. Furthermore, the probability of getting a loan was higher for homeowners and credit card holders. In contrast, savings negatively affected the probability of getting a loan. It was also found that amount of loan was influenced mainly by income, homeownership and the proportion of household members working. Households that saved money held small loan amounts. Age affected the high loan amount, but the effect of homeownership was higher in the low loan amount.
Similar content being viewed by others
Notes
The description of measurement and explanation of abbreviations used in the model specification are provided the Appendix (Table 6).
References
Abdul-Muhmin, A. (2008). Consumer attitudes towards debt in an Islamic country: Managing a conflict between religious tradition and modernity? International Journal of Consumer Studies, 32(3), 194–203. doi:10.1111/j.1470-6431.2008.00665.x.
Ambrose, B., LaCour-Little, M., & Sanders, A. (2004). The effect of conforming loan status on mortgage yield spreads: A loan level analysis. Real Estate Economics, 32(4), 541–569. doi:10.1111/j.1080-8620.2004.00102.x.
Ando, A., & Modogliani, F. (1963). The “life cycle” hypothesis of saving: Aggregate implications and tests. The American Economic Review, 53(1), 55–84.
Athanassiou, E. (2012). Household Debt and Domestic Demand: Greece versus other Euro zone Economies. International Journal of Business and Social Science, 3(10), 157–166.
Bank of Greece, Statistics Department. (2006). Indebtedness of households and financial stress: Research at the household level. Governor’s Annual Report 2005, Annex IV, Bank of Greece, Athina. [In Greek].
Bank of Greece, Statistics Department. (2008). Indebtedness of households and financial stress: Evidence from the survey 2007. Athina: Bank of Greece. [In Greek].
Bertola, G., Disney, R., & Grant, C. (2006). The economics of consumer credit demand and supply. In G. Bertola, R. Disney, & C. Grant (Eds.), The economics of consumer credit (pp. 1–26). Cambridge, MA: MIT Press.
Bertola, G., & Hochguertel, S. (2007). Household debt and credit: Economic issues and data problems. Economic Notes, 36(2), 115–146. doi:10.1111/j.1468-0300.2007.00181.x.
Bridges, S., & Disney, R. (2004). Use of credit and arrears on debt among low-income families in the United Kingdom. Fiscal Studies, 25(1), 1–25. doi:10.1111/j.1475-5890.2004.tb00094.x.
Bridges, S., Disney, R., & Henley, A. (2006). Housing wealth and the accumulation of financial debt: Evidence from UK households. In G. Bertola, R. Disney, & C. Grant (Eds.), The economics of consumer credit (pp. 135–180). Cambridge, MA: MIT Press.
Brown, S., Taylor, K., & Price, S. (2005). Debt and distress: Evaluating the psychological cost of credit. Journal of Economic Psychology, 26(5), 642–663. doi:10.1016/j.joep.2005.01.002.
Butler, M. (2001). Neoclassical life-cycle consumption: A textbook example. Economic Theory, 17(1), 209–221. doi:10.1007/PL00004098.
Campbell, J. (2006). Household finance. The Journal of Finance, 61(4), 1553–1604. doi:10.1111/j.1540-6261.2006.00883.x.
Casolaro, L., Gambacorta, L., & Guiso, L. (2005). Regulation, formal and informal enforcement and the development of the household loan market. Lessons from Italy (Economic Working Papers. 560). Retrieved from the Bank of Italy website: http://www.bancaditalia.it/pubblicazioni/econo/temidi/td05/td560_05/td560/tema_560.pdf.
Chen Chen, K., & Chivakul, M. (2008). What drives household borrowing and credit constraints? Evidence from Bosnia and Herzegovina (IMF Working Paper, WP/08/202). Retrieved from: http://www.imf.org/external/pubs/ft/wp/2008/wp08202.pdf.
Chen, A., & Jensen, H. (1985). Home equity use and the life cycle hypothesis. Journal of Consumer Affairs, 19(1), 37–56. doi:10.1111/j.1745-6606.1985.tb00343.x.
Crook, J. (1996). Credit constraints and US households. Applied Financial Economics, 6(6), 477–485. doi:10.1080/096031096333926.
Crook, J. (2001). The demand for household debt in the USA: Evidence from the 1995 survey of consumer finance. Applied Financial Economics, 11(1), 83–91. doi:10.1080/09603100150210291.
DeJuan, J., & Seater, J. (2007). Testing the cross—section implications of Friedman’s permanent income hypothesis. Journal of Monetary Economics, 54(3), 820–849. doi:10.1016/j.jmoneco.2005.10.019.
Del-Rio, A., & Young, G. (2005). The determinants of unsecured borrowing: evidence from the British household panel survey (Working Papers. 263). Retrieved from the Bank of England website: http://www.ecri.eu/new/system/files/49+determinants_unsecured_borrowing_uk.pdf.
Dougherty, C. (2007). Introduction to econometrics. Oxford: Oxford University Press.
Duca, J., & Rosenthal, S. (1994). Do mortgage rates vary based on household default characteristics? Evidence on rate sorting and credit rationing. Journal of Real Estate Finance and Economics, 8(2), 99–113. doi:10.1007/BF01097032.
Duong, P., & Izumida, Y. (2002). Rural development finance in Vietnam: A microeconometric analysis of household surveys. World Development, 30(2), 319–335. doi:10.1016/S0305-750X(01)00112-7.
Dutt, A. (2006). Maturity, stagnation and consumer debt: A Steindlian approach. Metroeconomica, 57(3), 339–364. doi:10.1111/j.1467-999X.2006.00246.x.
EL. STAT. (2009). Labour Force Survey. Hellenic Statistical Authority. Retrieved from: http://www.statistics.gr/portal/page/portal/ESYE/PAGE-themes?p_param=A0101.
EL. STAT. (2012). Labour Force Survey. Hellenic Statistical Authority. Retrieved from: http://www.statistics.gr/portal/page/portal/ESYE/PAGE-themes?p_param=A0101.
European Foundation for the Improvement of Living and Working Conditions. (2009). Second European Quality of Life Survey Overview. Dublin, IR: European Foundation for the Improvement of Living and Working Conditions.
Fabbri, D., & Padula, M. (2004). Does poor legal enforcement make households credit-constrained? Journal of Banking & Finance, 28(10), 2369–2397. doi:10.1016/j.jbankfin.2003.09.009.
Fafchamps, M., & Lund, S. (2003). Risk-sharing networks in rural Philippines. Journal of Development Economics, 71(2), 261–287. doi:10.1016/S0304-3878(03)00029-4.
Fidrmuc, J., Hake, M., & Stix, H. (2013). Households’ foreign currency borrowing in Central and Eastern Europe. Journal of Banking & Finance, 37(6), 1880–1897. doi:10.1016/j.jbankfin.2012.06.018.
Guo, S., & Fraser, M. (2010). Propensity score analysis. Statistical methods and applications. Thousand Oaks, CA: Sage Publications Inc.
Halkos, G. (2007). Econometrics. Theory and practice: Instructions in using Eviews, Minitab, SPSS and Excel. Athina: V. Gkiourdas. [In Greek].
Hancock, A., Jorgensen, B., & Swanson, M. (2013). College students and credit card use: The role of parents, work experience, financial knowledge, and credit card attitudes. Journal of Family and Economic Issues, 34, 369–381. doi:10.1007/s10834-012-9338-8.
Hartarska, V., & Gonzalez-Vega, C. (2006). Evidence on the effect of credit counselling on mortgage loan default by low-income households. Journal of Housing Economics, 15, 63–79. doi:10.1016/j.jhe.2006.02.002.
Heckman, J. (1979). Sample selection bias as a specification error. Econometrica, 47(1), 153–161. Retrieved from https://www.sonoma.edu/users/c/cuellar/econ411/Heckman.pdf.
Herendeen, J. (1974). The role of credit in the theory of the household. The Journal of Consumer Affairs, 8(2), 157–181. doi:10.1111/j.1745-6606.1974.tb00538.x.
Jappelli, T., & Pistaferri, L. (2007). Do people respond to tax incentives? An analysis of the Italian reform of the deductibility of home mortgage interest. European Economic Review, 51(2), 247–271. doi:10.1016/j.euroecorev.2006.04.003.
Kamleitner, B., & Kirchler, E. (2007). Consumer credit use: A process model and literature review. Revue Europeene de Psychologie Appliquee/European Review of Applied Psychology, 57(4), 267–283. doi:10.1016/j.erap.2006.09.003.
Kirchler, E., Hoelzl, E., & Kamleitner, B. (2008). Spending and credit use in the private household. The Journal of Socio-Economics, 37(2), 519–532. doi:10.1016/j.socec.2006.12.038.
Koenker, R., & Bassett, G. (1978). Regression quantiles. Econometrica, 46(1), 33–50. Retrieved from http://www.econ.uiuc.edu/~roger/NAKE/rqs78.pdf.
Koenker, R., & Hallock, K. (2001). Quantile regression. Journal of Economic Perspectives, 15(4), 143–156.
Leonard, T., & Di, W. (2013). Is household wealth sustainable? An examination of asset poverty reentry after an exit. Journal of Family and Economic Issues, (Online First). doi:10.1007/s10834-013-9357-0.
Lin, C., & Yang, T. (2005). Curtailment as a mortgage performance indicator. Journal of Housing Economics, 14(3), 294–314. doi:10.1016/j.jhe.2005.07.005.
Livingstone, S., & Lunt, P. (1992). Predicting personal debt and debt repayment: Psychological, social and economic determinants. Journal of Economic Psychology, 13(1), 111–134. doi:10.1016/0167-4870(92)90055-C.
Louzis, D., Vouldis, A., & Metaxas, V. (2012). Macroeconomic and bank-specific determinants of non-performing loans in Greece: A comparative study of mortgage, business and consumer loan portfolios. Journal of Banking & Finance, 36(4), 1012–1027. doi:10.1016/j.jbankfin.2011.10.012.
Lyons, A. (2003). How credit access has changed over time for US households. The Journal of Consumer Affairs, 37(2), 231–255. doi:10.1111/j.1745-6606.2003.tb00452.x.
Maddala, G. (1983). Limited—dependent and qualitative variables in economics. New York: Cambridge University Press.
Magri, S. (2002). Italian household’s debt: determinants of demand and supply. Temi di discussione. 454. Banca d’ Italia. Retrieved from http://www.bancaditalia.it/pubblicazioni/econo/temidi/td02/td454_02/td454en/en_tema_454_02.pdf.
Manrique, J., & Ojah, K. (2004). Credits and non-interest rate determinants of loan demand: A Spanish case study. Applied Economics, 36(8), 781–791. doi:10.1080/0003684042000229514.
Menclova, A. (2013). The effects of unemployment on prenatal care use and infant health. Journal of Family and Economic Issues, 34, 400–420. doi:10.1007/s10834-012-9339-7.
Mitrakos, T., & Simigiannis, G. (2009). The determinants of Greek household indebtedness and financial stress. Economic Bulletin, Bank of Greece, 32, 7–26. [In Greek].
Modigliani, F. (1966). The life cycle hypothesis of saving, the demand for wealth and the supply of capital. Social Research, 33(2), 160–217.
Modigliani, F. (1986). Life cycle hypothesis, individual thrift and the wealth of nations. The American Economic Review, 76(3), 297–313.
Nguyen, C. (2007). Determinants of credit participation and its impact on household consumption: Evidence from rural Vietnam, Discussion Paper. 2007/03. Centre for Economic Reform and Transformation. Retrieved from http://www.sml.hw.ac.uk/cert-repec/wpa/2007/dp0703.pdf.
Papapetrou, E. (2003). Wage differentials between the public and private sectors in Greece. Economic Bulletin, 21, 35–66. [In Greek].
Petrides, M., Mattheou, K., & Karagrigoriou, A. (2009). Determinants of mortgage indebtedness in the Cyprus household sector: Evidence from the Cyprus survey of consumer finances. Journal of Money, Investment and Banking, 9(1), 7–20.
Postmus, J., Plummer, S.-B., Mcmahon, S., & Zurlo, K. (2013). Financial literacy: Building economic empowerment with survivors of violence. Journal of Family and Economic Issues, 34, 275–284. doi:10.1007/s10834-012-9330-3.
Prawitz, A., Kalkowski, J., & Cohart, J. (2013). Responses to economic pressure by low-income families: Financial distress and hopefulness. Journal of Family and Economic Issues, 34, 29–40. doi:10.1007/s10834-012-9288-1.
Puhani, P. (2000). The Heckman correction for sample selection and its critique. Journal of Economic Surveys, 14(1), 53–68.
Sardianou, E. (2008). Estimating space heating determinants: An analysis of Greek households. Energy and Buildings, 40(6), 1084–1093. doi:10.1016/j.enbuild.2007.10.003.
Sharpe, D., Yao, R., & Liao, L. (2012). Correlates of credit card adoption in urban China. Journal of Family and Economic Issues, 33, 156–166. doi:10.1007/s10834-012-9309-0.
Smith, H., Finke, M., & Huston, S. (2012). Financial sophistication and housing leverage among older households. Journal of Family and Economic Issues, 33, 315–327. doi:10.1007/s10834-012-9293-4.
Sorokina, O. (2013). Parental credit constraints and children’s college education. Journal of Family and Economic Issues, 34, 157–171. doi:10.1007/s10834-012-9322-3.
Swain, R. (2007). The demand and supply of credit for households. Applied Economics, 39(21), 2681–2692. doi:10.1080/00036840600749516.
Togba, E. (2012). Microfinance and households access to credit: Evidence from Cote d’ Ivoire. Structural Change and Economic Dynamics, 23(4), 473–486. doi:10.1016/j.strueco.2012.08.002.
Wooldridge, J. (2002). Econometric analysis of gross section and panel data. Cambridge, MA: MIT Press.
Wooldridge, J. (2005). Introductory econometrics. A modern approach. Boston: South-Western College Publishing.
Zeller, M. (1994). Determinants of credit rationing: A study of informal lenders and formal credit groups in Madagascar. World Development, 22(12), 1895–1907. doi:10.1016/0305-750X(94)90181-3.
Acknowledgments
The author wishes to thank Lecturer Eleni Sardianou, Mr. Dimitrios Konstadopoulos, Ms. Chyssoula Kaitatzi and Ms. Melina Solaki for editing of the manuscript. In addition we would like to thank Editor Dolan and five anonymous reviewers for their constructive comments. All errors and deficiencies are the authors’ responsibility.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
About this article
Cite this article
Pastrapa, E., Apostolopoulos, C. Estimating Determinants of Borrowing: Evidence from Greece. J Fam Econ Iss 36, 210–223 (2015). https://doi.org/10.1007/s10834-014-9393-4
Published:
Issue Date:
DOI: https://doi.org/10.1007/s10834-014-9393-4